Geopolitical risk of Iran and the Caucasus: what to watch in 2023

Geopolitical risk Iran and the Caucasus SpecialEurasia
Geopolitical risk of Iran and the Caucasus (Credits: SpecialEurasia Monitoring & Risk Analysis Map)

Geopolitical Report ISSN 2785-2598 Volume 27 Issue 2
Authors: Silvia Boltuc & Giuliano Bifolchi

In 2023, military escalations, domestic political turmoil, and economic crises might increase Iran and the Caucasus’ geopolitical risk and threaten regional security, whose consequences might broadly destabilise the Eurasian strategic chessboard.

The Caucasus is a natural ‘bridge’ between Europe and Asia and a ‘frontier/border’ between the Christian and the Muslim worlds. Therefore, regional stability is fundamental for local actors, neighbouring countries such as Russia, Turkey, and Iran, and a political-economic bloc such as the European Union.

Iran is highly involved in the Caucasus. Due to its geographical position, the Islamic Republic of Iran can become a Eurasian logistic hub and interconnector. Furthermore, thanks to its natural resources, Iran might provide oil and natural gas to European and Asian markets.

In this framework, considering recent events which have characterised political dynamics in the Caucasus and Iran, this report wants to assess the regional geopolitical risk and highlight those issues we might monitor to understand future local developments and their impact on Eurasia.

The Islamic Republic of Iran
Geopolitical risk: high

What to watch:

  • Domestic political turmoil and protests against the central government
    Since the death of 22-year-old Mahsa Amini, who lost her life in unclear circumstances after being arrested by the Iranian ‘morality police’, Iran has been facing massive internal turmoil. Iranian domestic protests have pushed the West to reconsider the possibility of reaching a new nuclear deal with Tehran. In addition, European countries might impose new sanctions against the Islamic Republic of Iran, which will increase the socioeconomic problems and can fuel popular uprising. Consequently, Tehran could boost its ‘regionalism’ strategy and seek broader cooperation with Asian countries, especially the Russian Federation and China.
    Domestic protests have increased Kurdish and Azeri separatist movements’ activities against the central government. Consequently, in 2023, Iran might face tension with neighbouring Azerbaijan and Iraq due to its internal ethnic minorities.
  • Tehran’s membership in SCO and Iran’s logistic role in Eurasia
    Iran signed a memorandum of commitment for its permanent membership in the Shanghai Cooperation Organisation, enhancing its role in the Eurasian chessboard and strengthening the Moscow-Beijing-Tehran axis. The SCO membership offers Tehran a diplomatic forum for pursuing closer ties to the Central Asian region. For their part, Central Asian governments see Iran as a potential transit hub. Tehran has developed its ports’ infrastructures which may serve international goods transiting and are included in crucial international corridors: the International North-South Transport Corridor (INSTC) and the Belt and Road Initiative (BRI).
  • Iran-Russia cooperation in the Caspian Sea
    The Caspian Sea is the epicentre of several energy pipelines and projects which link Central Asian and Caucasian oil and gas fields to Europe. In the face of the EU – Russia confrontation, due to the Ukraine conflict and the Western sanctions against Moscow, the Russian Federation has increased its cooperation with Iran to contrast the EU Energy Security Strategy to decrease Brussels’ dependence on Russian energy exports.

    In this regard, the Russian Federation has hugely financed the upgrade of the port of Makhachkala, which has attracted Iranian economic interests since Tehran will play a primary role in the import-export activities of the Dagestani port. Therefore, in 2023, the Caspian Sea might experience a development of cooperation between Moscow and Tehran and the rising role of the Makhachkala Sea Commercial Port, which will challenge the nearest Azerbaijani port of Baku.
    Iran and Russia might extend their military cooperation in the Caspian Sea, the Middle East, the Caucasus, and other strategic areas. Indeed, Iran might support the Russian military operations in the Ukraine conflict by providing drones to the Kremlin. Consequently, the Western approach towards Iran might worsen due to Tehran-Moscow’s strategic closeness.

The Caucasus
Geopolitical risk: medium

What to watch:

  • Armenia-Azerbaijan military tension
    In September 2022, Azerbaijani military aggression against the Armenian sovereign territory alarmed the international community, worried about the beginning of a conflict in the region. The European Union is interested in the South Caucasus since Azerbaijan plays a pivotal role in Brussels Energy Security Strategy, particularly after the beginning of the Ukraine conflict and the consequential European sanctions against the Russian Federation. The military escalation and Moscow’s inability to respond quickly to the regional crisis through the Collective Security Treaty Organisation (CSTO) and its diplomatic role allowed the European Union to become more involved in the South Caucasus, especially in Armenia.
    On the other hand, due to the military aggression against the Armenian sovereign territory, several EU members of the Parliament accused Baku of violating international law. In France, the Senate adopted a resolution in support of Armenia, which condemned Azerbaijani military aggression against the Armenian sovereign territory and called for sanctions against Azerbaijan. In this context, avoiding a regional conflict is fundamental in Brussels’ energy strategy and foreign policy in the post-Soviet space.
    Looking at regional geopolitical dynamics, in 2023, Moscow will continue its foreign policy in the South Caucasus to maintain its influence on Armenia and Azerbaijan since the Kremlin considers the region part of its blizhnee zarubezhe (near abroad) and lebensraum (vital space). In this regard, Dagestan-Azerbaijan cooperation in transportation and logistics might support relations between Moscow and Baku and confirm Russia’s commitment to the Caucasus.

  • Nagorno-Karabakh/Artsakh humanitarian crisis and Azerbaijani blockade
    Azerbaijan’s transport and gas supply blockade of the Nagorno-Karabakh/Artsakh might cause a regional humanitarian crisis and evolve into a military escalation capable of destabilising the South Caucasus. The blockade highlighted Baku’s strategy to isolate the Republic of Artsakh and push local people to abandon their homeland seeking refuge in Armenia.

    Azerbaijani blockade challenges the Russian Federation’s authority in the South Caucasus and confirms Baku’s aggressive foreign policy against Armenia and the Republic of Nagorno-Karabakh/Artsakh. Indeed, due to Moscow’s military involvement in Ukraine and the Western sanctions against Moscow, Turkey has promoted its agenda in the South Caucasus and eroded Russian influence to expand its presence by supporting Azerbaijan.
    The humanitarian crisis in Nagorno-Karabakh/Artsakh poses pressure on the current Armenian government led by Prime Minister Nikol Pashinyan. Although Yerevan is looking to normalising its relations with Turkey and avoiding any military confrontation in the region, the Armenian government cannot be silent and inactive about the Azerbaijani blockade of the Nagorno-Karabakh and Baku’s military aggression at its borders.

  • Russia’s strategy in the North Caucasus during the Ukraine conflict
    The Kremlin will continue to support socio-economic development in the North Caucasus Federal District (NCFD) by attempting to connect the region with the Middle East and Africa. Considering the religious and cultural background, the North Caucasus has played an essential role in promoting the Kremlin’s foreign policy in the Middle East. For instance, Ramzan Kadyrov’s Chechnya has constantly supported relations between Russia and the Arab-Muslim world, especially the Gulf Arab countries such as Saudi Arabia and the United Arab Emirates.
    In this regard, in August 2022, the Central Bank of Russia spoke about its intentions to launch a pilot project on Islamic banking in Chechnya and Dagestan in 2023. This pilot project might attract interest and financial investments from Gulf Arab countries and influence Moscow’s domestic and foreign policy in 2023 towards the Arab-Muslim world.
    Suppose Moscow desires to fully develop the North Caucasus and link the region with the Middle East and Africa in 2023. In that case, the Kremlin needs to completely stabilise the area, which is still not immune to jihadist propaganda and terrorist activities. Notably, the Islamic State (IS) and Hayat Tahrir al-Sham (HTS) have proven their ability to reach young generations and Muslim believers in the North Caucasus.

  • Russia will continue to military and economically support Abkhazia and South Ossetia pushing Georgia closer to the West.
    During the first months of the Ukraine conflict, Kyiv invited Georgia (and also Moldova) to open a ‘second front’ against the Russian Federation through military operations against Abkhazia and South Ossetia. Although Tbilisi has always claimed that the two de facto republics are part of the Georgian sovereign territory under Russian occupation since the 2008 Russian-Georgian War, Georgia has often refused to impose sanctions against Russia or begin a military operation against Abkhazia and South Ossetia.
    Although a new conflict between Georgia and Russia seems highly difficult, in 2023, Abkhazia and South Ossetia might boost their cooperation and alliance with the Russian Federation to guarantee their territorial security and safety. In this context, the Russian military presence in Abkhazia and Moscow-Sukhum strategic relations ensures the Kremlin’s presence in the region and supports the Russian strategy in the South Caucasus.


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